EUR/USD: Inlation soaring in the Eurozone

Between two major releases on Friday, namely the Eurozone inflation and the US federal employment report, the EUR/USD continued to reflect the great caution of operators, the spot remaining compressed at the end of the bevel, towards 1.1050$ for one euro.

EuroStat has just confirmed the fears expressed earlier in the week by Mrs Lagarde, namely a sharp acceleration of inflation with the spectre of a contraction in the pace of economic growth amid major geopolitical tensions with Russia. On an annualised basis, prices in the broadest basket of goods jumped by 7.4% in March, well above expectations. This compares with 6.0% in February. In detail, "for the main components of euro area inflation, energy is expected to have the highest annual rate in March (44.6%, compared to 31.9% in February), followed by food, alcohol & tobacco (4.9%, compared to 4.3% in February), industrial goods excluding energy (3.5%, compared to 3.0% in February) and services (2.8%, compared to 2.6% in February)," the statistical institute says.

Right now, the pair is trading at $1.1026.

KEY CHART ELEMENTS
As long as the spot is trading above $1.10, the oxygen supply is assured. Below this level, there is no shortage of technical arguments to justify taking short positions. For the time being and in the absence of an interesting entry point, traders will avoid exposure. As for the background matrix, it remains unchanged. The transition phase between February 04 and 23, in the form of a non-federating slide below the 100-day moving average (in orange), is over. The bearish background bias is aligned with the short term, and a remarkable red body candle pattern on Thursday 24/02 illustrates the firm grip of the selling camp. With 5 red-bodied candles from March 1st to March 7th, and a continuous selling mobilisation in week 09, the picture remains bleak. Confirmation of a wedge formation is underway. A navigation within it is still to be expected. We will therefore keep an eye on its two limits, represented in black on our chart.

MEDIUM-TERM FORECAST
Given the key chart factors we have mentioned, our medium-term view on the EUR/USD is neutral.

We will maintain this neutral view as long as the EUR/USD is positioned between support at $1.1000 and resistance at $1.1140.